Energy Performance Certificates and Landlord Tax Deductions

The Accounted Tax Team·2 March 2026·9 min read

Energy Performance Certificates have become an increasingly important part of being a landlord in the UK. With minimum energy efficiency standards tightening and the government pushing for greener homes, many landlords are spending significant sums on EPCs themselves and on the energy improvements needed to meet the required ratings.

The question that naturally follows is: can you claim any of this against your tax? In this guide, we'll look at the tax treatment of EPC costs, energy efficiency improvements, and the broader implications for landlords trying to balance compliance with profitability.

What Is an Energy Performance Certificate?

An Energy Performance Certificate (EPC) rates a property's energy efficiency on a scale from A (most efficient) to G (least efficient). Every rental property in England and Wales must have a valid EPC before it can be marketed or let to a new tenant. EPCs are valid for 10 years.

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Since April 2020, the Minimum Energy Efficiency Standards (MEES) have required all rental properties in England and Wales to have an EPC rating of at least E. It's illegal to let a property with a rating below E unless a valid exemption is registered. The government has signalled its intention to raise this minimum to C for new tenancies in the coming years, though the timeline has been pushed back several times.

How Much Does an EPC Cost?

The cost of obtaining an EPC varies depending on the size and location of the property, but you'll typically pay between £60 and £120 for a standard residential property. Larger or more complex properties may cost more.

Is the Cost of an EPC Tax Deductible?

Yes. The cost of obtaining an Energy Performance Certificate is an allowable expense that you can deduct from your rental income when calculating your taxable profit.

HMRC treats the EPC as a revenue expense — it's a necessary cost of letting the property, incurred wholly and exclusively for the purpose of the rental business. You claim it in the same way as any other allowable expense, such as letting agent fees or insurance premiums.

This applies whether you're obtaining an EPC for:

A new letting
A renewal (when the existing EPC expires after 10 years)
Compliance with MEES regulations
A re-assessment after carrying out energy improvements

The deduction is straightforward, and there's no special box on the Self Assessment form for it — it simply goes into your total allowable expenses figure alongside your other property costs.

For a full list of what you can and can't claim, our guide to allowable expenses for landlords covers everything in detail.

Energy Improvements: Repair or Improvement?

This is where things get more interesting — and more nuanced. Many landlords are spending significant amounts on energy efficiency measures to meet current or anticipated MEES requirements. The tax treatment of this expenditure depends on whether HMRC considers the work to be a repair or an improvement.

The Repair vs Improvement Distinction

This distinction is fundamental to property tax and applies to all kinds of work on a rental property, not just energy measures:

Repairs are fully deductible as a revenue expense in the year you incur them. A repair restores something to its previous condition without materially changing its character or function.
Improvements are capital expenditure. They are not deductible from your rental income. Instead, they increase the base cost of the property for Capital Gains Tax purposes (reducing the gain when you eventually sell).

How This Applies to Energy Work

Here's how the repair/improvement distinction typically plays out for common energy efficiency measures:

Likely to Be a Repair (Deductible)

Draught-proofing existing windows and doors — this is maintaining the property's existing features
Replacing a broken boiler with a modern, energy-efficient equivalent — replacing like with like (even if the new model is more efficient, the function is the same)
Topping up existing loft insulation to a greater depth — enhancing what's already there
Replacing failed cavity wall insulation — restoring the property to its previous insulated state
Repairing or replacing existing double glazing with new double-glazed units

Likely to Be an Improvement (Not Deductible as Revenue Expense)

Installing double glazing where the property previously had single glazing — this is enhancing the property beyond its original state
Installing a completely new central heating system where there wasn't one before
Adding wall insulation to a property that was never insulated
Installing solar panels — this is adding a new asset to the property
Adding a new boiler where the property previously relied on electric heaters or an open fire

The Grey Areas

Many energy improvement projects fall into grey areas. For example:

Replacing an old single-skin wall with an insulated cavity wall during a broader renovation — is this a repair to the wall or an improvement to the insulation?
Upgrading a working but inefficient boiler to a modern condensing model — the old boiler wasn't broken, so this might be seen as an improvement rather than a repair

HMRC's guidance says that replacing something with a modern equivalent that serves the same function is generally a repair, even if the modern version is more efficient. But where the character of the asset changes (single glazing to double glazing, no insulation to insulation), it's more likely to be treated as an improvement.

When the amounts involved are significant, it's worth seeking professional advice to ensure you're treating the expenditure correctly.

Capital Gains Tax and Energy Improvements

If the energy efficiency work is classified as an improvement (capital expenditure), it's not wasted from a tax perspective — it just provides relief at a different point.

When you eventually sell the property, the cost of improvements is added to the base cost for Capital Gains Tax purposes. This reduces the capital gain and therefore the CGT you pay.

Example:

You bought a property for £180,000 and spent £15,000 on energy improvements (new double glazing, wall insulation, and a new heating system). When you sell for £280,000:

Without the improvement costs: Gain = £280,000 − £180,000 = £100,000
With the improvement costs: Gain = £280,000 − £195,000 = £85,000

At the higher rate CGT rate of 24%, that's a saving of £3,600. Not as immediately helpful as a revenue deduction, but not negligible either.

For more on property CGT, see our guide to Capital Gains Tax on property.

The Green Landlord — Available Grants and Incentives

Before spending on energy improvements, it's worth checking whether any grants or incentives are available. Various government and local authority schemes have come and gone over the years, and the availability changes regularly.

Energy Company Obligation (ECO)

The ECO scheme requires large energy suppliers to fund energy efficiency improvements in eligible homes. As a landlord, you may be able to access funding for measures such as:

Loft insulation
Cavity wall insulation
Boiler replacement
Heating controls

Eligibility typically depends on the property's EPC rating and the tenant's circumstances (for example, whether they receive certain benefits). It's worth checking with your energy supplier or a local ECO installer to see if your property qualifies.

Tax Treatment of Grants

If you receive a grant towards the cost of energy improvements, you can only claim a tax deduction on the amount you actually paid, not the full cost. If a grant covers the entire expense, there's nothing left to claim.

MEES Compliance and the Cost Cap

Under the current MEES regulations, there's a cost cap on the amount landlords are expected to spend to bring a property up to an EPC rating of E. If the cost of improvements exceeds the cap (currently £3,500 including VAT), you can register for an exemption and continue letting the property with a rating below E.

This cost cap is relevant to the tax analysis because it may limit the amount you actually spend. However, if you choose to spend more than the cap (to achieve a higher rating or for long-term investment reasons), the tax treatment of the expenditure is determined by its nature, not by the cap.

Future MEES Changes

The government's stated ambition is to raise the minimum EPC rating to C. If and when this happens, the cost cap and exemption rules may change, potentially requiring landlords to invest more in energy improvements. Staying informed about these changes will help you plan expenditure and manage the tax implications.

Landlord's Energy Saving Allowance (LESA) — Now Abolished

It's worth mentioning the Landlord's Energy Saving Allowance (LESA) because some older guidance still references it. LESA was a tax relief that allowed landlords to claim up to £1,500 per property for certain energy-saving measures, such as:

Loft insulation
Cavity wall insulation
Solid wall insulation
Draught-proofing
Hot water system insulation

LESA was abolished from April 2015. It no longer exists, and you cannot claim it on current or future tax returns. However, if you carried out qualifying work before April 2015 and didn't claim the relief at the time, you may be able to amend a previous return (within the four-year amendment window) to claim it retrospectively.

Practical Tips for Managing EPC Costs and Tax

Keep Detailed Records

For every piece of energy-related work, keep the invoice, a description of the work carried out, and (if possible) photographs of the before and after state. This documentation will be crucial if HMRC queries whether the work was a repair or an improvement.

Get the EPC Done Before Improvements

If you're planning energy improvements, consider getting an EPC done before the work so you have a baseline rating. Then get a new EPC after the improvements are complete. This demonstrates the impact of the work and supports your position if you're claiming the costs as repairs to existing features.

Budget for Ongoing Compliance

With MEES standards likely to tighten, factor ongoing EPC and energy compliance costs into your property business plan. These are costs that will recur over time, and planning for them ensures they don't catch you off guard.

Use Software to Track and Categorise

Tracking which expenses are revenue (deductible now) and which are capital (deductible on sale) requires careful categorisation. Using bookkeeping software like Accounted — where Penny can help flag the distinction as you record expenses — takes much of the guesswork out of the process and means your records are ready when it's time to file.

Summary

The cost of obtaining an EPC is a straightforward tax deduction for landlords. The tax treatment of energy efficiency improvements is more complex, hinging on whether the work counts as a repair or an improvement. Repairs are deductible from rental income; improvements are capital expenditure that reduces your CGT bill when you sell.

With energy efficiency standards set to become more demanding, understanding these rules now will help you plan your spending, maximise your tax relief, and keep your properties compliant without any nasty surprises.

Accounted helps UK sole traders stay on top of their bookkeeping and tax. Start your free 30-day trial at getaccounted.co.uk

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